If the expenditure side of the state budget remains at this level in the coming years, the government will be forced to raise taxes. Raising the social security contribution is a type of tax, but it is not enough at all. This became clear during a meeting of the parliamentary Subcommittee on Control of Public Funds, which is hearing members of the Fiscal Council on the draft state budget, reports novini.bg.
Either spending must be reduced or taxes must be raised sooner or later, said Lyubomir Datsov, a member of the Council.
Raising taxes is a political measure and it depends on us; if we are flexible enough, it may not happen. But yes, expenses must be reduced, which is the more reasonable option so far, said the chairman of the subcommittee Martin Dimitrov.
The Fiscal Council supports the restoration of the standard rate of 20% VAT for restaurant services and bread and flour, not only from a fiscal point of view - as a fiscal effect in the state treasury, but also as a guarantee of equality and fairness in taxation compared to other sectors of the economy. The measure was temporary in nature and is currently not relevant to the changed economic conditions. In principle, it did not achieve the expected result - maintaining or reducing the prices of final consumer products. In addition, the restoration of the tax rate is also a guarantee for the prevention of possible VAT abuses.
The Fiscal Council believes that the forecast for VAT collection is greatly overestimated. According to the report “VAT gap in EU” from 2024, the potential for collecting additional VAT revenues is estimated at 7.7%. The bill does not propose measures that would support such a huge jump in VAT revenues, explained Datsov.
The planned elimination of the reduced VAT rate of 9% for facilities and supplies of restaurant and catering services is expected to generate revenues of BGN 371.5 million, while the abolition of the reduced VAT rate of 0% for bread and flour is expected to improve VAT revenues by only BGN 93.4 million.
The measures to reduce the share of the shadow economy, to combat tax fraud, tax evasion and tax evasion are estimated to have a positive effect of half a billion, according to the Council.
According to economists, however, lowering the VAT registration threshold from BGN 166,000 at 100,000 leva, does not improve the economic environment, and is a "step back". "This is a measure that facilitates control bodies, but burdens small businesses with costs," the Council believes.
According to the Fiscal Council, the set of proposed policies and measures in the Draft Budget 2025 does not meet the economic goals and problems that the state budget should address. That is why the Fiscal Council believes that the revenues in the budget are overestimated.
In this regard, economists believe that the automatic indexations for salaries in some sectors, which lead to a budget imbalance, should be removed from the budget expenditures and the approach to budget preparation should be changed - to emphasize the efficiency and quality of public finances.